Investment in UK innovators in venture capital is on the rise in 2019

... Credit :
Shadrach   in Finance & Money

Last updated: 17 January 2020, 07:19 GMT

According to new research by KPMG, Venture Capital investment in innovative UK scaleups grew in 2019 hitting more than £ 9bn.

The KPMG Private Enterprise Global Venture Pulse Survey revealed an increase of 22 percent in the amount of money invested in UK fast growing businesses in 2019 compared to 2018.

According to PitchBook, the data recorded 1648 completed VC investments in 2019, with almost £ 2bn VC investments made in the last three months of 2019 to scale up companies, slightly down on the summer highs.

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The vast majority of deals completed were driven by VC investments in later stage companies, especially in the financial services, biotech, and healthcare sectors.

Commenting on the results, KPMG Private Enterprise Director Tim Kay, who deals with scaling businesses said: "Our scaling businesses have had a great year and continue to fly the flag for British creativity, attracting investment from all over the world.  Despite the political uncertainty, entrepreneurs had no trouble concluding mega-deals, because VC investors concentrated on companies later on

There was, however, a continued decline in early and seed stage deals.  Access to funding is a foundation for growth, and domestic innovation could be impacted if our next wave of entrepreneurs fail to attract the capital they need to grow now.  Whether or not early stage deals make a comeback this year remains to be seen as we may be seeing a fundamental shift in investor appetite.

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Record number of unicorns born in 2019

In 2019, 110 new unicorns were developed worldwide, including the UK's Babylon Health and Cambridge-based CMR Surgical, with a record number of VC-backed unicorns.

More than two-thirds of those unicorns were accounted for by the US, with a total of 73 including Ripple, Bright Education, Duolingo, Scopely and Next Insurance.

Europe has also set a new record, with 18 new unicorns in 2019 against 12 in 2018 and only 6 in 2017.  A record three unicorn births in 2019, like QuintoAndar, Loggi, and Wildlife Studios, highlighted Brazil's growing importance in the Americas.

The breadth and diversity of Europe's VC market and growing ecosystems for innovation continued to be on display this quarter, with six countries, including the UK, representing the region's top ten deals.

Europe exceeded its previous annual high VC investment, raising VC funding of $37.5 billion in 2019 compared to $28.2 billion in 2018.  In 2019 Germany, France and Spain reached new annual VC investment records.

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Trends to watch in 2020

Political and economic instability in several regions is expected to remain fairly high with a view to 2020.

VC investment across Europe is expected to remain high, and while there may be some increased activity on the IPO market, M&A and the propensity to stay private longer are likely to remain dominant.  Late stage transactions will continue to lead the way with an emphasis on businesses with strong business foundations and sustainable global growth models.

Fintech, health, B2B Services, AI and biotech are expected to keep attracting large volumes of investment while logistics, education, and ecommerce are all expected to remain hot growth areas.  Deep technology innovation is an area that is gaining momentum especially with Asian investors, even at early stage deals.